BUSINESS RATES

Rates as a form of property taxation originated in the Elizabethan poor law relief act of 1601 which made parishes responsible for helping the poor within their own parishes. To pay for the relief they were authorised to levy a poor rate on parishioners and this became a tax on the value of property. The parishes valued properties and set the rate that had to be paid. Occupiers of property would have to pay a set number of pennies for every pound their property was worth. In the nineteenth century councils were given powers to levy rates to pay for local services, and until the beginning of the Twentieth century the majority of council spending was locally financed. Government grants began increasingly to be paid to enable different areas of the country to provide consistent standards of service. These grants were usually given to councils to spend for purposes specified by central government. The General Rate was introduced by the Rating and Valuation Act of 1925 and local authorities became responsible for administering the rates in their localities. The separate Poor Rate was abolished in 1929 and rates became a general tax controlled by local authorities. In 1948 the responsibility of setting rateable values was transferred from local authorities to the valuation office; however rate poundages continued to be set locally. Domestic rate relief was later provided in that the poundage for domestic ratepayers was set at a lower level than for businesses. In the 1980’s the difference was 18.5 pence in the pound for England. Thus although the business rate was higher it could not be varied independently of the poundage for householders. Domestic rates were abolished in 1990 and the Community Charge or Poll Tax was introduced as a replacement form of local domestic taxation. (In 1993 the Community Charge was itself replaced by Council Tax.) The Local Government Finance Act of 1988 which brought in the Community Charge also introduced the National Non Domestic Rate for commercial premises. Responsibility for setting the rate in the pound for business rates was removed from local authorities and assigned to central government. Instead of each local authority having separate rate poundages there would be a centrally set Uniform Business Rate (UBR), which is now known as the Non Domestic Rating Multiplier. Since 2005 there have been two multipliers – a standard multiplier and a small business multiplier. The former is set at a higher rate to fund relief for small business. For each financial year central government sets the multipliers and these apply throughout England except for the city of London where there are separate arrangements. The multipliers are set in accordance with the rate of inflation and in order to cover small business rate relief. When non domestic revaluations take place multipliers are set at a rate that will ensure that the amount of revenue raised is the same as it was before revaluation with an addition to account for inflation. The proceeds from business rates are placed in a central fund and redistributed to councils as part of the formula grant allocation. (See also block grant). The money from business rates available for allocation to local authorities is referred to as the distributable amount. England Scotland and Wales each determine separate multipliers.